Why does buying sometimes lose in the short term?

Closing costs (typically 2-5% of the purchase price) are paid upfront and take years to recoup through equity building. If you sell within 2-3 years, renting is almost always cheaper when those costs are factored in.

What costs are not included?

This calculator omits closing costs, HOA dues, PMI (if applicable), tax deductions for mortgage interest, and the opportunity cost of the down payment invested elsewhere. Adding these would make the comparison more precise but also more complex.

Real Estate

Rent vs. Buy Calculator

The rent vs. buy decision is one of the biggest financial choices most people make. This calculator compares the net cost of buying a home (mortgage payments, taxes, insurance, maintenance, minus equity gained) against the cumulative cost of renting over the same period, accounting for home appreciation and annual rent increases.

Rent vs. Buy

How it works

Formula & methodology

Cost to Buy (net) = Total payments made (down payment + monthly PITI + maintenance) minus equity accumulated at the end of the period. Equity = Home value at sale - remaining mortgage balance. Cost to Rent = Sum of monthly rent payments over the period, with rent increasing by the annual rate each year. The lower net cost determines which option is cheaper over the chosen horizon.

Source: CFPB: Buying vs. renting a home

Example

Worked example

Example: buying a $350,000 home with $70,000 down at 6.5% / 30 years vs. renting at $1,800/month (3% annual increase) over 7 years. If the home appreciates 3%/year, buying may be cheaper net of equity — but renting wins in the first 3-4 years when transaction costs dominate.

FAQ

Frequently asked questions

Why does buying sometimes lose in the short term?: Closing costs (typically 2-5% of the purchase price) are paid upfront and take years to recoup through equity building. If you sell within 2-3 years, renting is almost always cheaper when those costs are factored in.
What costs are not included?: This calculator omits closing costs, HOA dues, PMI (if applicable), tax deductions for mortgage interest, and the opportunity cost of the down payment invested elsewhere. Adding these would make the comparison more precise but also more complex.

Tips

Practical tips

Run the numbers at your actual expected time horizon, not an arbitrary one — the breakeven point between renting and buying is highly sensitive to how many years you expect to stay.
Don't forget to account for the opportunity cost of your down payment — money used for a down payment could otherwise be invested, and that forgone growth is a real cost of buying.

Results are estimates for general informational purposes only and do not constitute financial, tax, or legal advice. Always confirm important figures with a qualified professional or your lender before making a financial decision.